Sensitivity of the Exporting Economy on the External Shocks: Evidence from Slovene Firms

In this paper we investigate the export participation of Slovene firms. We first show that sunk costs are an important factor for explaining the export behavior of Slovene firms. Next we show that when the absorption power of the exporting market declines, firms still trade with their established buyers (hysteresis) despite the fact that due to lower prices their exporting revenues decline. We show that this can be explained with high exit costs, which consist of switching costs (costs of replacing stable buyers with new ones) and cost of reducing the production (compensation money for excess workers) and high re-entry costs.http://deepblue.lib.umich.edu/bitstream/2027.42/40020/3/wp634.pd

Asset Stripping, Rule of Law and Firm Survival: The Hoff-Stiglitz Model and Mass Privatization in Montenegro

We provide the first test of the Hoff and Stiglitz (2004) model predicting whether and under what conditions mass privatizations are accompanied by asset stripping. In addition to directly testing the theory, we also tackle an important policy-oriented issue of why a large number of efficient firms disappeared during mass privatization in a booming economy of Montenegro. Econometrically, we present the first study to look at firms that disappeared during a mass privatization transition, improving upon prior studies that focused only on existing firms and assumed away survival bias. Our analysis suggests that asset stripping and firm disappearance were present, and that asset stripping was a likely reason for the loss of efficient firms. We show that because more productive firms were liquidated, it is important to model survival bias in the selection of firms remaining in samples when estimating the effects of privatization or other ownership changes. We also show that one needs to distinguish between true start-ups and liquidated firms that re-appear as start-ups. In the absence of the rule of law, many firms that appear to have disappeared were in fact appropriated by managers and politically connected individuals

Three Essays on Firm Behavior and Entrepreneurship in Former Yugoslav Republics.

This dissertation shows how the transformation of social ownership to private ownership affected the behavior of firms and entrepreneurship in selected former Yugoslav countries. The goal was to determine whether firms’ objective remains the maximization of income per worker and, on the other hand, whether the future growth of these economies can be based on privatized firms, entrepreneurship, and self-employment. The answers and insights provided by these three essays reveal that merely implementing the difficult and complex market-oriented and structural reforms that took place in all countries of the former Yugoslavia does not necessarily lead to changes in firms’ behavior, and that more self-employment does not necessarily mean more entrepreneurship and therefore cannot always serve as a basis for future growth. The first essay uses Macedonian firm-level data to examine whether the privatization of socially owned capital transformed the behavior of firms closer to profit maximization. It shows (a) that the behavior of the Macedonian firms from 1994 to 1999 is closer to the hypothesis of maximizing income per worker rather than maximization of profit, and (b) that firms that were privatized internally and firms that were privatized externally behave similarly, although the evidence indicates that the second group of firms mainly used strategic restructuring whereas the first group used defensive restructuring. The second essay seeks to determine whether the Slovenian apparel and footwear industries are an example of creative or plain destruction. The findings show limited support for the case of creative destruction. However, the last years of the analysis (1999–2001) reveal that the increase in productivity (albeit modest) was mainly due to surviving firms becoming more productive. The third essay focuses on entrepreneurship as the main source of future economic growth in Kosovo’s economy. The findings show that the highest potential for Kosovo’s economic growth lies in entrepreneurs with at least two employees. Self-employed persons are more constrained in their capabilities and opportunities and can therefore serve neither as a potential resource for the future development of entrepreneurship in Kosovo nor as a source of future economic growth.Ph.D.EconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/62284/1/mkoman_1.pd